The takeaway from this should be "Never listen to anyone who offers a fix for high housing costs if they say anything other than "Build more housing""
It wouldnt be such a problem if the free market could create land, could create public transportation to link up housing to cheap land or could be kept from creating "apartment bitcoins" with a 100% land value tax but it refuses to and it wont.
So, while the margins on luxury housing are ~15% and affordable is 4-6% the free market will rationally maximize the utility of property construction firms...
It's the same market, because those investors are already there whether or not new luxury housing is built. The people buying the ultra-high-end stuff will, if it's not available, buy slightly lower high-end stuff, and so on down the chain ad infinitum, resulting in higher prices for those low-end two-bedrooms. Conversely, the very-high-end stuff being built then frees up some fraction of housing capacity all the way down the chain, lowering prices. https://www.nmhc.org/research-insight/research-notes/2024/wh...
> inner city land is scarce
Inner city land here in Portland has plenty of surface parking lots, one- and two-family homes, and old buildings that have gone unused, sometimes for literally years†.
† This part also gets into the bizarre rules around commercial building valuations and mortgages, which can make it a better choice for the building owner (at the expense of the city) to leave a building vacant indefinitely and eat the commercial mortgage payments than to rent it out cheap and have the mortgage provider suddenly call in the entire loan because the building valuation went down.
Tax them more and they will decide that they dont need a huge and opulent second home in the middle of a city where all the jobs are.
>Inner city land here in Portland has plenty of surface parking lots, one- and two-family homes, and old buildings that have gone unused, sometimes for literally years.
100% land value tax will get rid of those too.
Until we catch up on literally decades of underbuilding housing, real estate in most US cities will be a good investment. The only question is which cities are gooder investments than others and how much money the investor has.
Or until the taxes on the investment change.
How many divisions does Henry George have?
It's not really relevant to bring in radical overhauls to our economic system when people are talking about what politically-possible changes might help improve the housing market.
Volume isn't something that companies tend to ignore.
In any case, there's a chain of purchasing; if people have to move somewhere then they buy whatever is available at the top of their budget. If there's a shortage of housing then they buy whatever was originally the cheaper housing. You can see this in London where in some areas 2-bedroom terraced houses are well over £1 million.
Unfortunately for them, an urban doom loop will not be kind to all the things that made Portland livable to begin with. The budget deficits looming city-wide are grim. On the housing front, our only hope is that the statewide ban on single family zoning plus urban growth boundaries will continue to structurally encourage density via infill.
Change "Build more housing" to "Increase supply of available housing". Those are distinct. There is a LOT of unused housing that sits empty. If you changed the incentives a bit, that housing would not sit empty, and thus the supply of available housing increases.
The effects seem to increase the housing supply but are in and of themselves not a one stop solution to the problem.
- more dense housing makes housing more expensive (and trying to explain why this isn’t true to them is usually met with some form of “nuh uh, capitalist simp”
- if housing is built by developers and not the government then new housing will be such bad quality that you might as well die instead of have a home
- anything short of the proletariat revolution and the end of history isn’t good enough, so we should oppose density so that the market fails even more and capitalism can finally collapse.
(This is all in Seattle, I’m sure the cocktail party conversations vary around the country)
Source: living in a developing country where regulations suck and am facing this awful problem.
It didnt get this way by accident.
Novel industrial policy mechanisms like this are always proposed and underperform market solutions.
One good example of this might end up being the American energy policy under Trump (with emphasis on the word "might"). Energy costs being high can be well-solved by increasing the supply of energy (drilling, etc). The easy-to-predict second-order negative impact of this is likely to be a harsher global warming curve. But, a harder to predict third-order impact might be increased innovation due to lowered costs of energy, enabling humanity to out-innovate global warming. Again, this is speculation, but that's how this generalization works, nine point eight times out of ten.
With housing: You increase the supply. An easy-to-predict second order impact is: housing values go down because of increased supply. But: A hard-to-predict third order impact is: Because there's more people, more businesses open shop, and that access to services actually raises your property value.
This is already happening.
Texas is building insane amounts of solar capacity because there's very little environmental regulation there, which makes solar cheap to build.
Meanwhile, California is stuck with non-renewables because it's impossible to build anything new in California.
While that's a difference, it doesn't really support your claim that "California is stuck ..."
But energy supply (by many different metrics) have been increasing for years. So either (a) energy costs are not high (b) increasing energy supply will not affect energy costs (c) it takes way more energy supply than we've seen over the last several years to affect energy costs.